It hasn't been the best quarter for Ambarella, Inc. (NASDAQ:AMBA) shareholders, since the share price has fallen 25% in that time. In contrast, the return over three years has been impressive. The share price marched upwards over that time, and is now 255% higher than it was. So the recent fall in the share price should be viewed in that context. The thing to consider is whether the underlying business is doing well enough to support the current price.
In light of the stock dropping 5.2% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.
Given that Ambarella didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last 3 years Ambarella saw its revenue grow at 6.0% per year. Considering the company is losing money, we think that rate of revenue growth is uninspiring. In contrast, the stock has popped 53% per year in that time - an impressive result. Shareholders should be pretty happy with that, although interested investors might want to examine the financial data more closely to see if the gains are really justified. It seems likely that the market is pretty optimistic about Ambarella, given it is losing money.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Ambarella is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Ambarella in this interactive graph of future profit estimates.
A Different Perspective
It's good to see that Ambarella has rewarded shareholders with a total shareholder return of 14% in the last twelve months. Having said that, the five-year TSR of 20% a year, is even better. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 3 warning signs for Ambarella you should be aware of.
Of course Ambarella may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.